State Street

February 20. 2012 3:00AM

State Street

Battle over collection of online sales tax heats up

Lobbying was escalating last week over the fate of an effort to force online retailers to collect sales taxes in New Jersey, as well as discussions over whether Amazon.com could delay collecting the taxes in exchange for bringing jobs, according to sources that are following the talks.

There also appeared to be differences among Democratic legislators about whether to offer an exemption to Amazon and, if so, what time period the exemption should cover, the sources said.

New Jersey Retail Merchants Association President John Holub said he wasn't aware of a deal regarding Amazon, and his group is pushing forward in its advocacy of S-1305, a bill that would require the company to immediately begin collecting taxes.

"There's nothing to compromise on," Holub said.
However, the bill stalled last week, although advocates insisted that online retailers must begin collecting the tax.

Others said it was Holub's effort that faced an uphill climb, with the two sides differing on how difficult it would be to establish whether companies like Amazon have established "nexus" in the state, or a legal basis for being required to collect taxes.

Amazon is making the case that even adding a distribution center wouldn't establish nexus. There is federal case law that offers some support for that position.

Holub wants the state to base its nexus case on Amazon's ownership of a subsidiary in the state, Newark-based Audible.com. He said using that as the basis would not affect independent Amazon affiliates like West New York-based eCoupons.com, which offers coupons for products for sale on Amazon.

Amazon has offered to open two distribution centers and bring 1,500 jobs to the state in return for a 22-month exemption. A legislator supportive of bringing the company to the state said it is a good opportunity to add blue-collar jobs.

However, legislators are reportedly balking at the length of the exemption offered to Amazon and have countered with a shorter deal ending in August 2013.

NJBIZ also learned last week that Walmart became involved in talks over a potential compromise, though the discussion may have been short-lived, a source said.

The talks reportedly involved the retail giant, Assemblyman Louis D. Greenwald (D-Voorhes) and the Chris Christie administration all cutting a deal with Amazon. Under the proposal, Walmart would drop its opposition of Amazon's request for a two-year sales tax holiday, clearing the way for legislation that would be backed by Greenwald and fast-tracked to Christie's desk.

In return, Amazon would effectively help Walmart lobby Congress for a definitive, comprehensive federal law regulating sales tax collection by online retailers, the source said. But as of Feb. 16, the would-be compromise hadn't materialized after failing to win the support of other key legislators.

There is an incentive for Christie's administration to support collecting more Internet sales taxes — facing another tight budget year, the state could use additional sales tax collections. Currently, residents are required to report taxes on online sales themselves — with the not-too-shocking result of underwhelming collections. It's a topic of spirited debate within state government.

Contributing: Joshua Burd

Keeping diverse interests aligned on foreclosure bill

Groups with diverse agendas lined up to support a bill that would ease the conversion of abandoned, foreclosed houses into affordable housing, but keeping that diverse coalition intact may prove to be a challenge.

Sens. Raymond J. Lesniak (D-Union) and Barbara Buono (D-Edison) sponsored the measure, S-1566, which would establish a new state agency to purchase foreclosed properties and add deed restrictions so that they would be resold as affordable housing. The bill also gives municipalities an incentive to convert the homes, by doubling their credit for state affordable-housing requirements.

The sponsors gathered statements of support from the state Realtors, builders and bankers associations, as well as from the New Jersey League of Municipalities. It also gained partial support from the Housing & Community Development Network of New Jersey.

But the two-for-one credit may prove a stumbling block as housing advocates push for more housing. A lobbyist following the bill's progress expressed surprise that the builders signed onto the bill, noting that it could significantly cut their ability to push for new development in some towns.

There is some pressure to get the bill done soon, since municipalities are required to "commit" housing funds under a 2008 law by July. Towns have been hesitant to commit the funds with uncertainty surrounding the state housing requirements. Even if the bill becomes law and provides limited certainty in the short term, lobbyists foresee a major reconfiguration of state housing laws as the composition of the state Supreme Court shifts.

Expecting tax hikes to be off-limits in budget speech

Thanks to the governor's airtight lock on releasing information, lobbyists may not have a strong sense of what Christie will unveil in his annual budget address, but the budget may be less stressful to clients than some previous budgets.

Aladar G. Komjathy, managing partner of Komjathy & Stewart LLC, said he no longer has to prepare clients for large tax increases.

"The good thing for our clients is, we're not going to hear any tax increases," Komjathy said., "The 'T' word is not a word that's spoken around here."

That doesn't mean that the spending plan will be easy on State Street. Lobbyists who are looking for appropriations for their clients know the task will be challenging in a year when Christie must make room for pension and transportation funding alongside his proposal for income tax cuts and additional business tax cuts.

"I think many lobbyists have come to grips with the fact that money is tight and it's very hard to garner any appropriations," said Ryan Peene, of MBI-GluckShaw. "Much of the time we are playing defense."

A senior State Street lobbyist overheard rumblings that Christie would address the issue of whether he supports a higher-education bond act, but where he stood on the issue remained unclear for now.

Another lobbyist said Christie must deal with a last-minute wrench thrown into the current budget — a $100 million-plus hole caused by a Medicaid shortfall.

Possible conflict in push for veteran business set-sides

Having succeeded last year in passing a state law setting aside contracts for veteran-owned businesses, Sen. Donald Norcross (D-Audubon) is pushing to allow the practice in local towns.
Norcross became interested in the issue from his work on the Senate Military and Veterans' Affairs Committee, according to his staff.

The measure would allow towns to determine whether they want to participate, and to set up their own parameters for which companies are eligible. They may include companies that aren't owned by veterans, but which promise to add veteran employees.

The bill figures to get solid support from vets, such as Robert Harrington, owner of Glassboro-based marketing firm Manna Design Works.

"We're not looking for handouts, we're not looking for gifts, but something like this could help level the playing field" for business owners who have lost time building businesses and making contacts while serving in the military, Harrington said.

A lobbyist did note that setting aside more contracts, when combined with existing set-aside for small businesses, could squeeze out some nonveteran businesses from receiving contracts that they would otherwise receive.